PE 12-4B Partner bonus

Hiro has a capital balance of $75,000 after adjusting assets to fair market value. Marone contributes $25,000 to receive a 40% interest in a new partnership with Hiro.

Determine the amount and recipient of the partner bonus.


Answer:

Equity of Hiro……………………………………………………………………… $ 75,000
Marone’s contribution……………………………………………………………… 25,000
Total equity after admitting Marone……………………………………………… $100,000
Marone’s equity interest………………………………………………………...… × 40%
Marone’s equity after admission………………………………………………… $ 40,000
Marone’s contribution……………………………………………………………… 25,000
Bonus paid to Marone……………………………………………………………… $ 15,000